This is the first post of a Budget and Tax Center blog series on public services and programs that face cuts in the budget process or have been underfunded in past years.

There would be 70 fewer school nurses in North Carolina’s public education program under the Senate budget, even though the statewide average nurse-to-student ratio has been far below national standards for at least a decade. In addition to this 30 percent cut to the School Nurse Funding Initiative, the Senate budget would shift the remaining 166 nurses to the state’s most economically lagging counties, known as Tier 1 counties.

Apparently, the Division of Public Health “asked” for this cut in response to the Governor’s directive to cut spending by 2 percent, per the comments made today by the Fiscal Research Division staff. Senate budget writers factored agencies’ responses to the Governor into their budget proposal. Again, this is just another decision by leadership that makes clear the harmful choices that must be made when policymakers reduce the availability of revenue—which is what occurred when lawmakers passed last year’s tax plan that drains available revenue for public investments.

The North Carolina Senate passed their budget just past mid-night, in the wee hours of Saturday morning. The Senate budget puts into clear perspective the high price ordinary North Carolinians will have to pay for last year’s tax cuts that primarily benefit the wealthy and profitable corporations. Despite progress in some areas, the proposal leaves too many vital public services operating at diminished levels—failing to catch up with the needs of kids, working families, and communities five years into the official economic recovery. Our overview of the Senate budget can be read here.

State spending under the Senate budget would be 6 percent, or $1.4 billion, below the last budget that was enacted before the Great Recession, adjusting for inflation. Yet, there are more students to educate, citizens to serve and protect, and older adults to help care for.

Due to tax changes enacted last year, budget writers are now dealing with the consequences of a self-imposed budget challenge. State lawmakers created a structural deficit in which revenues are falling short of what is needed to meet critical needs across budget areas. The state is facing a revenue shortfall of $191 million in the 2015 fiscal year (not to be confused with the nearly half-a-billion shortfall for the current 2014 fiscal year that ends in June).

Since assuming office Gov. McCrory has throttled the theme that Medicaid is broken and must be reformed. He began by offering a radical proposal of dismantling our current system and selling it off to private insurance plans. He has since backed away from that idea and now wants a more modest expansion of what currently works in Medicaid.

The House, in a bipartisan bill filed this session, clearly agrees with the Governor’s new approach. The legislation, spearheaded by Rep. Nelson Dollar, would build Accountable Care Organizations (or ACOs) in Medicaid. These provider led ACOs would move us toward greater integration of care and away from fee-for-service medicine. Medicare is using the ACO model as are many private insurers. In fact, Medicaid is one of the only payers in the state not moving to this method of organizing care.

In its budget, the Senate flatly rejects this approach. That chamber wants Medicaid to move to full capitation. In other words, legislators want to provide a set budget to Medicaid. The insinuation is that the Senate prefers the Governor’s original plan to pay private insurers to care (or not care, as the case may be) for our most vulnerable citizens.

The Senate also engages in some fantasy by pulling Medicaid into a freestanding department that will engage the nation’s best health care minds in this ambitious reform effort. At least that’s how Sen. Louis Pate described the proposed process. The trouble, of course, is that the nation’s best health care minds consider North Carolina’s Medicaid program to be an important model and they aren’t interested in helping to dismember it. The nation’s best health care minds also aren’t interested in coming to our state and spending time tearing apart care for low-income people as the legislature reduces services, limits eligibility, and slashes the budget. We are, in short, engaged in the opposite of innovation.

Rep. Dollar is a smart chap and likely realizes that his ACO bill isn’t going anywhere as a piece of legislation. That means he will need to stick the proposal into the House budget to give it a fighting chance. Hence, the showdown mentioned in the title of this post.

Certainly the House is moving in a better direction. But it’s a good time to reflect that Virginia is having its own budget battle over Medicaid right now. Except instead of fighting over how to fiddle with (or blow up) a program that is working, Virginia’s leaders are having a serious discussion about using federal funds to expand Medicaid coverage to 400,000 people. If that happens it means that our tax dollars will help boost Virginia’s economy, bolster its rural hospitals, and support its citizens.

On Wednesday evening, the North Carolina Senate unveiled its $21.16 billion budget proposal for the 2015 fiscal year that begins in June 2014 and ends in July 2015. The Senate leadership decided to put the budget on a fast track to approval, bypassing the appropriations subcommittee process and scheduling the final debate to begin today at 4pm into early Saturday morning.

Even when lawmakers have an adequate amount of time to review the full budget proposal—and to be clear, in this case, an adequate amount of time was not allowed—budget debates tend to spend a majority of the time on the spending side. Yet, how the state raises the billions of dollars that fuel the state budget gets relatively little scrutiny compared to the rest of the budget during the budget process.

Examining how the Senate pays for its budget is more important than ever in light of last year’s tax plan that drains $438 million from the state’s coffers in the upcoming fiscal year. This is on top of the fact that lawmakers are facing a current year revenue shortfall, a projected revenue shortfall for the next 2015 fiscal year, and a Medicaid shortfall. Read More

Yesterday evening, members of the Senate Finance Committee gathered to consider a modified version of House Bill 1050 (HB 1050) which includes repealing the local privilege tax. A repeated claim by proponents of the tax repeal is that additional revenue from the local sales tax – resulting from the tax plan passed last year – will make up for the revenue lost from repealing the local privilege tax.

It is clear that $13.8 million in additional local sales tax revenue is not sufficient to replace $63 million in lost revenue from the repeal of the local privilege tax. Less revenue means local governments will likely be further challenged with providing its residents with core public services and an attractive quality of life.